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Henry Schein (HSIC) Q2 Earnings Top Estimates, '22 EPS View Up

Henry Schein, Inc. HSIC reported earnings per share (EPS) of $1.16 in the second quarter of 2022, up 4.5% from the year-ago period’s adjusted EPS. Moreover, reported EPS surpassed the Zacks Consensus Estimate by 3.6%.

Revenues in Detail

Henry Schein reported net sales of $3.03 billion in the second quarter, up 2.1% year over year. The metric missed the Zacks Consensus Estimate by 2.2%.

The year-over-year uptick included 2.4% internal growth in local currencies, 2.1% growth from acquisitions and a 2.4% decline related to foreign currency exchange.

In the quarter under review, the company recorded sales of $2.26 billion in the North American market, up 5.8% year over year. Sales totaled $771 million in the international market, down 7.3% year over year.

Segment Analysis

Henry Schein derives revenues from three operating segments — Dental, Medical and Technology and Value-added Services.

In the second quarter, the company recorded $1.85 billion of global Dental sales, down 3.1% year over year. In local currencies, the segment’s revenues include an internally-generated sales decline of 0.3%, 0.7% growth from acquisitions and a 3.5% decline related to foreign currency exchange.

Henry Schein, Inc. Price, Consensus and EPS Surprise

 

Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. Price, Consensus and EPS Surprise

Henry Schein, Inc. price-consensus-eps-surprise-chart | Henry Schein, Inc. Quote

 

Further, the internal decline in local currencies of 0.3% included a 1.1% plunge in North America and a rise of 1% internationally. Overall dental sales performance reflects a continued recovery in patient traffic compared to the pre-pandemic levels.

North America’s dental consumable merchandise’s internal sales in local currencies fell 3.5%, whereas dental equipment internal sales in local currencies rose 8.1%. Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, fell 0.3% and rose 5.5%.

Global Medical revenues rose 10.4% year over year to $996 million. The segment’s revenues include an increase of 6.7% in internal local currencies, 3.9% growth from acquisitions and a 0.3% decline related to foreign currency exchange.

Revenues from global Technology and Value-added Services rose 18.3% to $181 million. This included a rise of 10.8% in internal local currency sales, 8.8% growth from acquisitions and a 1.5% decline related to foreign currency exchange.

Margin Trend

In the reported quarter, gross profit totaled $945 million, reflecting a 6.1% uptick year over year. Gross margin expanded 116 basis points (bps) to 31.2%.

Selling, general and administrative expenses rose 7.1% to $680 million in the quarter under review.

Overall adjusted operating profit was $265 million, reflecting a rise of 3.5% year over year. Meanwhile, the adjusted operating margin contracted 12 bps year over year to 8.7%.

Financial Position

The company exited the second quarter of 2022 with cash and cash equivalents of $108 million compared with $126 million at the end of the first quarter of 2022. Long-term debt for the company at the end of second-quarter 2022 was $769 million compared with $773 million at the end of the first quarter of 2022.

Cumulative net cash provided by operating activities from continuing operations till the end of the second quarter of 2022 was $157 million compared with $159 million in the year-ago period.

During the second quarter of 2022, the company repurchased roughly 1.3 million shares of its common stock. The company had approximately $90 million authorized and available for future stock repurchases by the end of the reported quarter.

2022 Guidance

Henry Schein affirmed the earnings per share guidance for 2022.

For 2022, Henry Schein expects GAAP earnings per share in the range of $4.75 to $4.91, suggesting 7-10% growth over 2021 GAAP earnings per share and growth of 5- 9% compared with 2021 non-GAAP diluted earnings per share. The Zacks Consensus Estimate for the metric is currently pegged at $4.86.

For 2022, Henry Schein expects sales growth of nearly 3% to 6% over 2021 (down from its prior expectation of 5-8% growth). The Zacks Consensus Estimate for revenues is currently pegged at $13.09 billion.

Our Take

Henry Schein ended the second quarter of 2022 with better-than-expected earnings. The company recorded substantial revenue growth across the Medical and Technology and Value-added Services segments, instilling optimism. Within Medical, the company saw robust sales of point-of-care diagnostic tests, including flu test kits, generic pharmaceuticals and equipment. Expansion of margins seems encouraging. The raised EPS guidance for 2022 is indicative of this growth momentum continuing.

However, revenues for the second quarter missed the consensus mark. The decline in global Dental sales does not bode well. Patient appointment cancellations and staffing-related challenges from a rise in COVID-19 infections continued to hamper business results. Escalating operating expenses is a concern.

Zacks Rank and Other Key Picks

Henry Schein currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Medpace Holdings, Inc. MEDP and Merck & Co. MRK.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.1% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Medpace Holdings, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $1.46, which beat the Zacks Consensus Estimate by 8.9%. Revenues of $351.2 million outpaced the consensus mark by 1.3%.

Medpace Holdings has an estimated growth rate of 22.7% for full-year 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 17.3%.

Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.

Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.


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